India’s claim to be catching up with the advanced economies, specifically on research and development in science, technology and innovation, deserves a reality check. Instead of laying out the growing role of multinational corporations in driving India’s R&D and the resultant risks arising from this, a series of headline indicators are cited by the government, to paint a rosy picture.In December 2022, Dr Jitender Singh, Union Minister for Science and Technology said that India stood third in scientific publications, trailing only the United States and China. He said in November 2025 that India ranked sixth globally in resident patent filings. These statements reflect the Union government’s optimistic view that structural changes have enabled progress in the science, technology and innovation (STI) sector.The same view features in the Department of Science and Technology’s National Science and Technology Survey, 2025-26. Dr Umesh V. Waghmare, secretary, Department of Science and Technology, observes in this report that India’s Gross Expenditure on Research and Development (GERD) has more than tripled over the past decade, rising from Rs 79,356 crore in 2013-14 to Rs 2,44,768 crore in 2023-24.MNC dominationThe report highlights that research and development (R&D) expenditure has grown faster than GDP in recent years, suggesting that STI is driving India’s economic growth. But the same report shows that multinational companies (MNC) accounted for 71.3% of business R&D in India in 2023-24, up from 49.9% in 2020-21.It is this domination of MNC-led R&D that is being officially interpreted as India having developed a science, technology, engineering and mathematics (STEM) talent powerhouse – one that is ready to scale – and to claim that foreign MNCs now need incentives to spread into every corner of the country.This perspective ignores the structural rigidities and policy gaps within which India’s national system of innovation (NSI) functions. The abridged reporting by the DST masks the real story behind the rise in BERD: that the direction of R&D and innovation will not be determined in India but in the headquarters of foreign players.Apart from the growing domination of MNCs in R&D expenditure, the gap between R&D figures reported for Indian and foreign MNCs speak for themselves.The reported rise of foreign MNCs’ R&D expenditure in the 2025-26 report (a survey conducted by DST) has occurred even when the number of R&D units of foreign MNCs covered in it fell from 139 to 124.Inadequate disclosuresThe sources and methods used by the Ministry of Science and Technology (MoST) also demand a complete disclosure. For instance, it has not shared the names of private sector entities covered in the survey. This disclosure is limited to the information available for public sector or joint sector undertakings.MoST is treating the names of private sector entities as confidential information, which calls for a methodological correction. Its reporting practice is not consistent with, for example, the OECD’s Frascati Manual, 2015, which sets the global guidelines for measuring and reporting R&D, requires providing the public with a breakup of the magnitude and orientation of R&D of foreign affiliates, outsourced R&D and internal MNC group transfers.The details of investors are available with MoST: Disclosures are required not only of the analysis of foreign and Indian MNCs’ R&D expenditure but also of the R&D of non-MNC private sector entities, which cater the most to home-market building.MSME R&D output reportingMicro, small and medium scale enterprises (MSMEs) undertake R&D and innovation by combining STI and doing, using and interacting (DUI) modes of learning. MSMEs are the primary engines for employment, informal sector survival and localised problem-solving. They are the backbone of India’s NSI. In many industrial sectors, in-house R&D efforts of MSMEs integrates the STI and the DUI modes.In the report, there is no separate assessment of R&D outputs from foreign and Indian MNCs, non-MNC private-sector entities and Scientific and Industrial Research Organisations (SIROs), which are classified as non-profit organisations. It is important to note that the type of R&D work undertaken in India by MNCs of foreign origin is quite different from the type of R&D work undertaken by non-MNC businesses.Sector-wise reporting of R&D outputs is required to separately assess the contributions of foreign and Indian MNCs, non-MNC private-sector entities and SIROs. MoST should disclose not only the list of foreign and Indian MNCs, non-MNCs businesses and SIROs, but also the R&D outputs by sector.False optimismUnlike advanced capitalist nations, where private enterprises drive over 70% of R&D investments, India’s research architecture has been historically dominated by public funding. The excitement in the government is on account of the reported change in the composition of GERD.Business Expenditure on Research and DevelopmentWhile the GERD shows that India’s overall R&D spending is rising, BERD shows who, within the business sector, is driving that spending. BERD reporting has shown an especially strong upward trend in the participation of commercial enterprises whose R&D focus is not connected to the urgent development needs of the Indian people. The excitement over the rise of BERD is connected with the government (which talks about Viksit Bharat). But it is not recognised that R&D is just one of many inputs that can lead to innovation. Viksit Bharat should be connected to the domestic R&D and local challenges.Further, the government’s optimism does not sit well with the facts on the ground. Sunil Mani and Anurag Anand, writing in the Economic and Political Weekly, have asked for a statistical qualification based on their analysis of Tata Motors’ numbers.They bring out that though industrial BERD is reported to have more than doubled between 2020–21 and 2023–24, industrial R&D personnel did not increase as reported in the respect of Full Time Equivalents (FTEs) of manpower employed. The number of FTEs of manpower employed declined from 2,18,644 to 1,98,208. Their view is clear: that a near doubling of industrial R&D expenditure alongside a shrinking industrial R&D workforce warrants explanation.Judging by the analysis, it would appear that seemingly inflated figures of Tata Motors’ R&D expenditure – by including Jaguar Land Rover (JLR) figures – have been used by MoST while reporting BERD for India. Thus, Rs 29,380 crore as a consolidated figure of R&D expenditure for Tata Motors does not sit well with the reporting practice of OECD’s Frascati Manual, 2015.In 2023–24, Tata Motors R&D expenditure in India was only Rs 4,864 crore. Its Rs 24,516 crore R&D investment was overseas – in the United Kingdom (UK).Source: Tata Motors, FY 2024 highlights.This overseas R&D is not India’s national effort. Tata Motors acquired an established R&D unit from JLR, which belongs to the national effort of the United Kingdom. Tata Motors European Technical Centre (TMETC) is also based at the University of Warwick, Coventry, in the UK. Tata Motors has an India hub at Pune and one at Sanand.Recently, the formal demerger of Tata Motors, which created two distinct corporate entities, TML Commercial Vehicles (TMLCV) and Tata Motors Passenger Vehicles Ltd (TMPV), fundamentally restructured the company’s joint engineering ecosystem. The demerger ensures that JLR’s operational management remains completely self-contained.Core software development, premium vehicle diagnostics and next-gen cell chemistry engineering remain legally proprietary to JLR in the UK rather than becoming joint intellectual property of the Indian conglomerate. Proprietary manufacturing methods or basic material science patents developed under the unified Tata Motors umbrella are now partitioned via cross-licensing agreements, allowing both independent companies to utilise legacy institutional knowledge without structural overlap.Under the demerger framework finalised by the National Company Law Tribunal (NCLT), JLR’s engineering and corporate independence is now structurally separate and protected. Tata Motors co-houses the Passenger Vehicle and Electric Vehicle business with the primary listed entity, which has been completely separated from the Commercial Vehicle arm.Frascati manual guidelines on MNCs’ R&D effortsIn the OECD Frascati Manual, the “nationality” or geographic allocation of R&D and S&T services activity is determined by the economic residence of the institutional unit performing or funding the R&D, rather than the legal nationality of the owners, citizens or parent companies.The manual applies two core principles to assign an R&D activity to a specific country: Physical Location of Performance and Centre of Economic Interest of institutional Unit. An institutional unit is a business, university, government branch, or non-profit whose nationality is tied to the country where it engages in economic activities for a significant period.The manual provides clear international guidelines for measuring and reporting MNCs’ overseas R&D. In the case of Tata Motors, at the very most, its overseas R&D expenditure could have been reported explicitly as the R&D expenditure of Tata Motors’ foreign affiliate located in the UK. (But even the four Indian auto sector firms taken together, Tata Motors, M&M, Bajaj and TVS, spend 3.8% of their global turnover on R&D, which drops to just over 1% without Tata Motors’ JLR subsidiary in the UK. The world average for the auto sector is 4.8%.)A subsidiary of a foreign country operating inside the UK cannot be counted as India’s national R&D performance. Frascati applies precise rules to track true national activity. Even if a domestic company funds an R&D project but contracts a laboratory abroad to perform the work, the funding counts as an export of R&D funds to the Rest of the World (RoW) sector, and the performance nationality belongs to the foreign nation.Real story of GCCs engineering R&DThere is also the story of Global Capability Centres (GCCs). The GCCs are Foreign MNCs, refusing to register with MoST and come under national scrutiny. In India, the workforce at Engineering, Research and Development (ER&D)-focused GCCs accounts for about 42% of the total GCC workforce. Over 8 lakh (800,000) FTEs are involved in undertaking providing ER&D.India now hosts over 1,760 GCCs employing 1.9 million (19 lakh) professionals. Frascati Manual allows MoST to report this as the “real boom” in BERD. However, GCCs involve transfers within multinational enterprise groups. Therefore, these figures could have been reported as internal funding transfers for R&D between a foreign parent company and a local subsidiary; an international financial flow. Of course, such funding cannot be treated as domestic funding.Setting up R&D operations in India yields 70% to 80% lower R&D costs and 40% to 60% lower labour costs compared to Western locations. GCCs, where the number of R&D units reported varies anywhere between 1760 to 2500, can be legitimately reported as international financial flows.Apparently, the National S&T Survey left the GCCs out of its coverage. Since the Frascati Manual provides for reporting multinational enterprise group transfers, the logic of leaving out GCCs is not clear. Supposedly, the roadblock underlined by NITI Aayog prompted MoST to hide this story of GCC boom.For innovation policymakers, treating R&D, manufacturing, workforce development and the market feedback loop as separate rather than parts of a single continuous learning system poses a problem for learning, competence building and innovation making.True, the distinction between MNCs with manufacturing operations and those without them – such as pure-play digital and services hubs – significantly affects their contribution to the national innovation system and patters of FTE employment.Roughly 31% of India’s corporate R&D goes to basic or applied laboratory research. The remaining 69% is allocated to design, development and testing.By hiding this story of GCCs from R&D statistics MoST is doing a disservice, and not helping national policymaking.S&T indicators tablesThe Frascati Manual has clear spaces for separately reporting sector wise information on organisational capital, human resources, R&D services and computer related services. National R&D statistics and S&T indicators clearly need sector-wise reporting of disaggregated information on the R&D activity of not only MNCs but also for MSMEs and SIROs.The Global INTAN-Invest database identifies India as increasingly important in the accumulation of knowledge-based assets. The 2025-26 S&T Indicators should therefore provide available estimates of DUI (doing, using and interacting) innovation outcomes that mostly arise from in-house R&D carried out by MSMEs.DUI represents learning gained through experience, everyday workplace practices and interactions with customers, suppliers and competitors. Its integration into R&D can be reflected in the scale and scope of R&D undertaken by the MSMEs fo the home market in India. The shares of R&D outputs should be reported by sector.A key dimensions of the national R&D ecosystem is reporting on R&D expenditure, human resources, institutional participation, research output and sectoral performance. Currently, the S&T Indicators Tables do not provide a reliable statistical framework to assess the country’s sector wise R&D and S&T trends. The survey conducted between December 2024 and December 2025, as a census of R&D-performing institutions identified through the periodically updated Directory of R&D institutions, cannot limit its focus to foreign and Indian MNCs.In the absence of breakup figures, it is impossible to give a definite verdict on whether India’s national innovation system is changing, or whether it is improving or worsening. What we do see is that government-owned commercial corporations and the joint sector contribute a mere 4.1% share to the total GERD.Sectoral contributions to the GERD have changed drastically in respect of the contributions of the government.The government was contributing 54.4% in FY 2018-19. This share reduced to 50.4% in Fy 2020-21, 40.8% in Fy 2021-22, 38.2% in FY 2022-23, and 34.9% in FY 2023-24. The changes that have occurred and been made visible are a matter of concern for us.There is no attempt to cover the nature and orientation of BERD in the report issued by MoST. Analysis suggests that commercial research spending in India is skewed and concentrated within six sectors of industry. In the drugs and pharmaceuticals sector, R&D investments are concentrated in Indian MNCs with the highest proportional spending as a percentage of sales turnover. Their focus is mainly on exports of generic formulations and clinical trials.In the information technology & software sector, R&D investments are concentrated in foreign and Indian MNCs, with fast-growing talent intensity focusing mainly on supply of software engineering and computer services to Western corporations. In the transportation and automotive industry, R&D investments are concentrated in both Indian and foreign MNCs and their focus is shifting to electric vehicles, battery systems and automated tech.In the automotive and semiconductor sectors, MNCs that possess a local manufacturing base have focused their R&D on process optimisation, material substitution and local market adaptation. In the biotechnology and chemicals sector, R&D investments are concentrated in foreign and Indian MNCs with a focus on research services for the development of crop inputs, medical tech and specialty chemicals, which support commercial localisation or local manufacturing.In electricals and electronics sector, R&D investments are concentrated on hardware, telecom and green energy fuelled by national manufacturing incentives. In the defense industries sector, R&D investments are driven primarily by PSUs such as HAL.Although the NSTMIS-DST list of firms covered is yet to be made public, research reveals that leased frameworks used in advanced capitalist countries block claiming credits locally if the project is fully funded by a foreign parent entity.R&D statistics should report the incentives going as financial flows to these entities for R&D and innovation. These entities are receiving huge benefits from the government. These MNCs actively maximise the benefit from government’s Production Linked Incentive (PLI) scheme. The ER&D services market alone is valued at $147.27 billion, driven by MNC captives.Missing elements of R&D output reportingTracking as per the OECD’s Frascati Manual will allow policymakers to seek relevant RDI outputs. Tax authorities rely on Frascati boundaries to determine which activities qualify for national R&D rax credits and incentives.Most jurisdictions restrict tax incentives exclusively to R&D performed within national physical borders. Subsidies and incentives should require the intellectual property created to be legally held by the domestic resident unit. To avoid steep tax penalties, parent companies must increase local budget allocations to pay a higher premium for advanced engineering.Missing reporting of IP realityTax frameworks follow OECD’s framework of tracking compliance of Development, Enhancement, Maintenance, Protection and Exploitation (DEMPE) framework. MNCs typically fund their Indian GCCs using an arm’s length price framework. If an Indian GCC employs top-tier PhDs who actively develop, enhance and protect new software or molecular pipelines, the Indian entity is performing heavy DEMPE functions.The parent group cannot simply pay the Indian site a baseline 10% operational markup for such work. It is possible to assert a claim over a slice of the parent company’s global IP revenues.MNCs use specific legal and operational models for budgeting separately for their software intellectual property between GCCs and global parent hubs. Rather than transferring complete legal ownership to India, GCCs isolate economic execution from strategic IP title ownership.This separation protects their tax obligation and shields the parent company. Indian GCCs employ over 55% of the world’s GCC presence or bases. A vast majority of the resulting software IP are registered with USPTO under the parent firm’s name rather than with the Indian Patent Office (IPO). IP export drivers reside in expenditure structured for global product rollouts. Budgets are directed toward developing IP owned by the parent company headquarters.The patent filing strategy of global pharmaceutical MNCs at the IPO shows that pharmaceutical chemistry and core drugs compounds remain heavily dominated by foreign applicants. While domestic firms and residents now lead in the total number of applications filed, foreign MNCs still heavily dominate final patent clearances and grants.Concluding remarksFor the first time in Indian history, private sector research investment has overtaken the government’s share. The rise of business expenditure on research and development (BERD) is being claimed as a policy-induced structural shift toward private-sector-led innovation.Private commercial enterprises form the largest block of BERD. These entities are committing 1,18,351.68 crore rupees, which approximates to 48.4% of total GERD. India’s learning and skills system is increasingly incorporating the outsourcing of services of domestically educated STEM talent, especially in the information technology enabled business and software services and clinical trial and pharmaceutical services sector.As an important structural shift, wherein the R&D composition reveals focus on foreign markets, needs a critical assessment. It does not mean that private sector, MNC-dominated R&D innovation system would deliver Aatmanirbharta (self-reliance) and Vikas (development) to India. The emergent system is structurally and systemically misaligned to influence the innovation process for self-reliance and development for India.In the case of sunrise and strategic sectors, the MNC-dominated private sector is dependent on imports of goods, services and technologies. The amounts being spent on importing technologies from abroad in the form of royalties and technology licensing fees is rising.Foreign companies have been increasing their imports into the country. The conduct of domestic private capital is also no different. The ratio of the expenditure on domestic technology development versus technology imports is declining.Many MNCs, particularly those from the United States, now also use India as a base for R&D work without locating production locally. They are interested in creating IPRs for themselves in sunrise and strategic sectors using the Indian STEM talent.The volume of the top three foreign companies alone (~6,000+ patent applications) routinely surpasses the combined applications of the top 20 domestic corporations. According to trade assessments by NITI Aayog, high-technology and industrial imports – specifically electronics, integrated circuits, solar components and advanced machinery – continue to dominate India’s import bill.Many primary equipment manufacturers still rely on licensing foreign technologies rather than deploying native designs. NITI Aayog points out that India currently has roughly five lakh full-time researchers. Compare this figure with the 8 lakh full-time researchers employed in engineering R&D by GCCs.The comparison makes the extent of influence of emerging structural rigidities on the national R&D system quite obvious. For an informed discussion, MoST needs to be pressurised to make the disaggregated picture public and make its data transparent.Dinesh Abrol is retired chief scientist, CSIR-NISTADS and retired professor, ISID, New Delhi.